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tech.com
OEMs Consider Cross-Border Move in Face of Uncertainty
By Jeff Elliott F
or OEMs that rely on the Maquiladora industry in Mexi- co, such as the automotive,
electronics and medical device indus- tries, the threat of increased tariffs on imports as high as 35 percent has caused considerable uncertainty. Factor in that such a move could spark a trade war and OEMs appear to be rightfully concerned, with many considering their options to keep prices on finished goods at a compet- itive level. What is sure, is that any significant increase in the cost of goods from Mexico will leave U.S. companies that rely on lower-cost la- bor with a tough decision. Among the options are to main-
tain existing operations in Mexico and likely raise the cost of finished products, or to relocate stateside. For the latter, this could mean a full move back, or a small, cross-border move to cities already in a tight- working relationship with Mexican counterparts and the supply chain infrastructure. “Companies will have to consider
their options and bridge the gap be- tween what their cost will be to re- main (in Mexico) and the cost to relo- cate back to the U.S.,” says Hector Macias, director of Northpoint Tech- nologies, a U.S.-based company that manufactures switches, flexible PCBs and assemblies, touchscreens, and
If put under new trade restrictions, OEMs may choose to relocate stateside from Mexico.
wire harnesses for the medical, auto- motive, defense, telecommunications, industrial, and consumer markets. Macias estimates that the fully- burdened labor costs, which include
taxes, benefits and supplies, in Mex- ico are approximately $3.25 to $3.50 per hour, compared to $10.25 to $10.50 in the U.S. This does not ac- count for valuable incentive pack-
ages provided by the Mexican gov- ernment in the form of tax breaks, land and infrastructure. “There is already quite a gap in
cost, so companies may not even move,” says Macias. “Instead, they may opt to increase the costs of the finished product to absorb some of the additional costs.” If this occurs, it will inevitably
become a case of “the consumer al- ways pays” as the cost of consumer products, such as cars, flat-screen TVs and home appliances, rise. “To me, the biggest hurdle of
any restructuring of NAFTA is going to be to convince consumers to pay 25 percent more for the same model of microwave that is now made in the U.S. instead of Mexico,” adds Macias. In many ways, Macias is at the
epicenter of this issue. Over the past 35 years, he has been involved in over 300 transfers of either produc- tion lines or plants into Mexico by U.S.-based companies. Now as direc- tor of Northpoint Technologies, many of the turnkey electronic subassem- blies his company supplies involve labor-intensive assembly. According to Macias, his compa-
ny has been able to offer competitive pricing on these subassemblies, in part because of its geographic loca- tion and ability to price from differ-
Continued on next page
May, 2017
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